The really interesting angle to this is that (apparently) Windows 8 and the next version of office are going to default to storing a lot of stuff in Skydrive. So unless you actively try to store stuff locally it is going up to the cloud. It will be very interesting to watch what happens as a tidal wave of (intended to be) private porn hits Skydrive and consumers get their accounts banned en masse.
Like others, I think MS is in a dead end street here. There is stuff that they just can't allow - harboring child porn is illegal regardless of whether you're storing it for someone else, etc. But if they don't default content into Skydrive then hardly anybody will use it and people will keep assuming Google Docs and other cloud services are just "better" for collaboration. The only way out is client side encryption, but that disables many server side functions (eg: search) and gets god-awful complex for sharing between parties.
Like others, I think MS is in a dead end street here. There is stuff that they just can't allow - harboring child porn is illegal regardless of whether you're storing it for someone else, etc. But if they don't default content into Skydrive then hardly anybody will use it and people will keep assuming Google Docs and other cloud services are just "better" for collaboration. The only way out is client side encryption, but that disables many server side functions (eg: search) and gets god-awful complex for sharing between parties.